Why we rip off state

BEE company owners say they are forced to provide poor-quality goods at inflated prices to recoup the costs of paying mandatory kickbacks to corrupt politicians and government officials. Nine black businessmen told The Star that they are required to “grease the machinery”, a term for kickbacks, or face exclusion for dubious reasons from multimillion-rand contracts. In addition, they said they were expected regularly to donate huge sums to the ANC, its leagues, the SACP or even opposition parties in charge of a province or municipality. The Star has learnt that the kickbacks are paid in cash, or through subcontracts given to relatives or the spouses of politicians and public servants, or the winning bidders are instructed to buy expensive “gifts”, such as cars worth up to R1 million.

The businessmen spoke on condition of anonymity for fear of victimisation, jeopardising their chances of getting future business or implicating themselves in criminal behaviour. Between them, they do business with the state at all levels and in all provinces. Their firms operate in key sectors of the economy such as infrastructure, management consulting, property, transport, water reticulation and roads. They admitted to inflating prices, paying kickbacks or knowing someone who has done so over the past two years. However, they denied it was an exclusively black practice, saying white directors were also guilty of the same crime. The kickbacks ranged between 5 and 10 percent of the total contract value, or up to 50 percent of the total value of the profit made, they said.

The businessmen said the practice was particularly prevalent in the Eastern Cape, Gauteng, Limpopo, Mpumalanga and the Free State. Big tenders in all provinces are usually “spoken for” or earmarked for certain people or companies, they said. If those earmarked did not oblige (with the process), they would be disqualified for questionable reasons by members of the bids evaluation and adjudication committees. A Gauteng-based businessman, whose company does business in four provinces, said the problem was corruption rather than BEE companies. “You pay to be introduced to the political principals, you pay to get a tender, you pay to be paid and you must also grease the machinery. “From time to time you are called to make donations to today’s ANC and tomorrow’s ANC. There are also donations to the youth league, the women’s league and the SACP.”

A property and construction mogul blamed greedy politicians for the inflated prices, saying they “are behaving as if life is coming to an end. It is now or never and they are putting maximum pressure on the administrators.” A Limpopo businessman said they had to pay kickbacks and recoup the money from the public because almost all tenders in the province or municipalities were awarded to connected people. “Certain tenders of R5 million and above are reserved for [certain] people: R2 million to R5 million are for the mayors. R1 million to R2 million are for the mayoral committee members, and below are for the municipal managers, including three quotations,” the businessman insisted.

He said it was untrue that the practice was limited to BEE companies, saying “what about Gustav Savoi [the Uruguayan businessman accused of corruption]? Is he black?” An Eastern Cape-based businessman said he was recently approached with demands for R1 million in exchange for a R25 million municipal contract he had tendered for and been recommended for. “They said I can get the money from the contingency funds. I said that was ‘not my money’. “They said ‘Chief, if you don’t want to give us the R1 million, you are not going to get the tender. We will give it to someone else’, and I lost it.” Another businessman said: “Even if you have a payment that is stuck, someone will say ‘Look, I have this invoice in front of me. I can fast-track it if you give me something’.”

The Star spoke to various owners of black companies in the wake of ANC secretary-general Gwede Mantashe’s statement last week that BEE companies used the state as their cash cow by supplying substandard goods at abnormally large fees. Speaking at an ANC dialogue series at the University of Johannesburg in Soweto, Mantashe had said black-owned firms built public schools or supplied a loaf of bread at three times the normal price. He implored BEE companies to reflect on whether their own conduct was not contributing to the “huge ideological attack” on the policy. Mantashe said last night that the businessmen must report “those things. Otherwise, we are destroying the state and the concept of BEE. In fact, they are confirming the parasitic nature of BEE.”

SACP spokesman Malesela Maleka dismissed the businessmen’s claims as the “worst form of dishonesty”. “It shows that what Gwede said was right. The fact that people make provisions to pay bribes tells you what kind of business people we have. Honest citizens have an obligation to say no to a request for a bribe, and to report such an incident, not to comply,” he added.